Identify Which of the Following Statements Is True

question 37

Multiple Choice

Identify which of the following statements is true.

• A) Under the check- the- box regulations, an LLC that has one member (owner) may be disregarded as an entity separate from its owner.
• B) A new LLC that is owned by four members elects to be taxed under its default classification (as a partnership) in its first year of operations. The entity is prohibited from changing its tax classification at any time in the future.
• C) An unincorporated business may not be taxed as a corporation.
• D) All of the above are false.

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Definitions:

Margin of Safety

The difference between actual or projected sales and the break-even point. It measures the amount by which sales can decline before a business incurs a loss.

Contribution Margin

The amount of revenue remaining after deducting variable costs, which contributes towards covering fixed costs and then generating profit.

Operating Income

The income generated from the primary activities of a business, determined by deducting operating costs from the gross profit.

Selling Price

The amount a buyer pays to purchase a product or service from a seller.